Politicians often instruct households to spend in order to help the economy. This advice overlooks the fact that
a. increases in consumption will make it easier for households to deal with unanticipated future expenses.
b. increases in consumption will provide more loanable funds for investment.
c. you cannot have a strong economy if all or most households are spending just about everything they earn.
d. consumer spending is less than two-thirds of GDP.
Answer: c. you cannot have a strong economy if all or most households are spending just about everything they earn.
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The principle of diminishing marginal utility says that
A) marginal utility is negative as the quantity of the good consumed increases. B) total utility decreases as the quantity of the good consumed increases. C) total utility increases by smaller and smaller amounts as the quantity of the good consumed increases. D) total utility increases by larger and larger amounts as the quantity of the good consumed increases.
Static tax analysis assumes that
A) an increase in a tax rate may lead to a decrease in the tax base. B) an increase in a tax rate will lead to an increase in the tax base. C) an increase in a tax rate will leave the tax base unchanged. D) the tax base will always remain unchanged.
From an economic viewpoint, the optimal amount of pollution:
a. is zero since all pollution imposes costs on society. b. is that amount which firms create when they maximize economic profits by setting their marginal private costs equal to market price. c. is that amount where the marginal social costs of producing a good precisely equals the price of the good. d. b and c are correct.
Gross domestic product that is based on existing prices is called:
a. nominal GDP. b. current GDP. c. money GDP. d. all of these.